13 ms·

I don't expect to change your mind, but I had a very different reading of this article than you did and here are my thoughts on the 4 points that you raised: 1

by samcal 7y ago

I don't expect to change your mind, but I had a very different reading of this article than you did and here are my thoughts on the 4 points that you raised: 1. I don't think it's a big secret that stamping out unions is a key part of modern management. If McKinsey and other consulting firms were management consultants, they should be even more aware of that strategy and would have been in a key position to effect that change over a large number of companies. 2. CEO salaries are certainly relevant to the working middle class, since they are commonly seen as tremendously too high and the extra money could contribute to the middle class' wage. 3. I think the point of that sentence is more like "the amount of effort it takes to become successful is significantly greater than it was when the system worked better." 4. He's not trying to be the technocratic management, he's literally arguing against its existence.

dcolkitt 7y ago
> the extra money could contribute to the middle class' wage. Aggregate CEO pay at the largest 350 firms in the US was $6 billion in 2018[1]. Let's quadruple that to account for the remainder of large firms and other C-suite executives. Let's assume all of CEO compensation is entirely rent-seeking, CEOs don't add anything of economic value, and we can just redistribute their compensation to every man, woman and child in the US with no loss of GDP. In total that would represent an income gain of only $72 per year for the median person. CEO pay may be symbolically important, but it's simply inconceivable that rising CEO compensation has had any meaningful impact on middle class wages. [1] https://www.epi.org/publication/ceo-compensation-2018/ https://www.epi.org/publication/ceo-compensation-2018/
- rayiner 7y ago
  A average CEO pay in the Fortune 500 is 14.5 million: https://aflcio.org/paywatch https://aflcio.org/paywatch. That’s $7.2 billion total. The Fortune 500 employs 26 million people. If you paid CEOs zero and redistributed it all, everyone would get a raise of about $277 per year.
  - dcolkitt 7y ago
    The median annual compensation for the median Fortune 500 company is $72,000 per year.[1] So total redistribution would represent an increase of 0.3% to the take-home pay of the average big company worker. Again, no matter how you want to slice it, aggregate CEO pay is simply too small in magnitude relative to aggregate American salaries to have any meaningful impact. At most you could say something about it being symptomatic of a larger problem, but CEO pay is absolutely not the direct cause of slow growth in wages. [1] https://www.usatoday.com/story/money/business/2018/05/25/ceos-11-million-year-salary-just-middle-pack/643823002/ https://www.usatoday.com/story/money/business/2018/05/25/ceo...
    - AstralStorm 7y ago
      I'd say lobbying and voting with money is, and CEOs are responsible for it. The richer they are, the less they care about wage or product, the more they care about extracting rent - via investment or cuts, causing stock market reactions, which ignore all those things. They tend to also lose the common touch, just like the aristocracy that preceded them.
- james_s_tayler 7y ago
  CEOs don't add anything of economic value? Riiiiiight.
  - dcolkitt 7y ago
    In case it wasn't clear, I'm not making that claim. I'm simply laying out the most generous conceivable case to show why it's mathematically impossible for CEO compensation to directly explain slow secular growth in wages.
creato 7y ago
> 2. CEO salaries are certainly relevant to the working middle class, since they are commonly seen as tremendously too high and the extra money could contribute to the middle class' wage. This may be how they are "commonly seen", but is it correct? Walmart pays 5 of its executives a total of ~$70m/year [1]. Walmart employs 2.2m people [2]. Redistributing 100% of these 5 executives' salary to all 2.2m workers would be a raise of... $32/year. The bigger issue with wealth inequality is the investor class and favorable treatment of capital (low capital gains tax rates, carried interest, shady real estate business, etc.), not salaries/wages, even extremely high salaries like those of executives. Even talking about "management" as relevant to this issue is a distraction. 1. https://www1.salary.com/WALMART-INC-Executive-Salaries.html https://www1.salary.com/WALMART-INC-Executive-Salaries.html 2. https://corporate.walmart.com/newsroom/company-facts https://corporate.walmart.com/newsroom/company-facts
- rayiner 7y ago
  > The bigger issue with wealth inequality is the investor class and favorable treatment of capital (low capital gains tax rates, carried interest, shady real estate business, etc.) It’s not that either. Total realized capital gains income in 2017 was $660 billion. 30% of that went to the bottom 99%. So you’re talking about $462 billion to the top 1%. Even totally confiscating that income and redirecting it to the bottom 99% would only increase income for the bottom 99% by 5.5%. People see eye popping CEO pay but divvying up a few very high incomes doesn’t go far. 60% of all income is earned by the top 60-99%. 40% is earned by the top 20%. A lot of income inequality is driven not by CEOs and billionaires, but educated urban professionals. College administrators, programmers, doctors, IT managers, etc.
  - asdff 7y ago
    Even 5.5% would be a big deal for many people. Minimum wage is about to hit $15 in california, so 30k/yr netting you another $1650. 4/10 americans can't come up with $400 without selling something or incurring debt; this would at least be breathing room. I agree that parceling it out piecemeal might not be the best way to spend that sum. $462b could be put into an education or infrastructure trust, and pay dividends towards our schools, public housing, roads, and transit networks. And that would be $462b per year dumped into this trust.
manigandham 7y ago
The vast majority of CEO positions are nowhere near the 8/9 figure ranges. The ones that are involve making decisions that affect thousands or millions of employees and their families, numerous vendors and suppliers, entire secondary industries, along with hundreds of billions of dollars in business value. In that case, the pay is a tiny fraction of company earnings to get talent that's capable and willing to shoulder that responsibility and also accept any potential long-term reputation hits. Companies aren't looking to waste money. If they could find a magical CEO at 1/10th of the price, they would. There's a reason those jobs are worth that much.
- unlinked_dll 7y ago
  I mean there are reasons. The debate is if they're good reasons and what impact they have on the rest of the company and society as a whole. Looking at medians and averages isn't the same thing as looking at extrema, and discarding those extrema is harmful to the data set when you can try and infer things about those extremes and how they impact the data set. Every person working on data eventually has to deal with this. When it comes to executive compensation the question isn't if it's a market reality or not. It obviously is. The question is if those market realities are beneficial to everyone else impacted by the market, and many would argue otherwise. Yes, golden parachutes and lucrative salaries/equity options are par for the course for fortune 1k companies. But how do those packages influence incentives? Are they encouraging, even creating positive feedback loops for short term incentives that cause inefficiencies in our companies? Are they a symptom or source of greater issues relating to long term health of our labor markets for average workers? I don't know, but it's worth investigation.
  - manigandham 7y ago
    The extrema includes the size and scope of the company that pays those salaries, so you need to take that into account. It's generally agreed that more performance-based pay with long-term goals and clawbacks on excessive failures, negligence and unethical acts is the way to go, and most companies are already shifting to this.
- badpun 7y ago
dvt 7y ago
> I don't think it's a big secret that stamping out unions is a key part of modern management. If McKinsey and other consulting firms were management consultants, they should be even more aware of that strategy and would have been in a key position to effect that change over a large number of companies. This is revisionism. Stamping out unions has nothing to do with modern management and everything to do with the (eternal) conflict between management vs. unions. The reason why unions are more and more scarce is a complex one riddled with both positives (employers are more sensitive to employee needs, government has implemented legislature that protects workers) and negatives (unions are often rife with corruption and cronyism). McKinsey is a footnote at best. > CEO salaries are certainly relevant to the working middle class, since they are commonly seen as tremendously too high and the extra money could contribute to the middle class' wage. This has already been debunked ad nauseam in this thread. We should be talking about capital gains, offshore accounts, low-interest corporate bailouts, quantitative easing (!!!), etc. But CEO salary outrage gets clicks. > I think the point of that sentence is more like "the amount of effort it takes to become successful is significantly greater than it was when the system worked better." I'm not sure how you're reading that. If anything, he mentioned how most CEOs of old had worked on the company line for like 30 years prior and is lamenting that "all" executives need these days is a diploma from an elite school and a McKinsey badge.
a3n 7y ago
High executive pay is not all of what's capturing working class value. It's also corporations simply not paying as much percentage of production to producers as they used to.

by samcal 7y ago

dcolkitt 7y ago

> the extra money could contribute to the middle class' wage. Aggregate CEO pay at the largest 350 firms in the US was $6 billion in 2018[1]. Let's quadruple that to account for the remainder of large firms and other C-suite executives. Let's assume all of CEO compensation is entirely rent-seeking, CEOs don't add anything of economic value, and we can just redistribute their compensation to every man, woman and child in the US with no loss of GDP. In total that would represent an income gain of only $72 per year for the median person. CEO pay may be symbolically important, but it's simply inconceivable that rising CEO compensation has had any meaningful impact on middle class wages. [1] https://www.epi.org/publication/ceo-compensation-2018/ https://www.epi.org/publication/ceo-compensation-2018/

rayiner 7y ago
A average CEO pay in the Fortune 500 is 14.5 million: https://aflcio.org/paywatch https://aflcio.org/paywatch. That’s $7.2 billion total. The Fortune 500 employs 26 million people. If you paid CEOs zero and redistributed it all, everyone would get a raise of about $277 per year.
- dcolkitt 7y ago
  The median annual compensation for the median Fortune 500 company is $72,000 per year.[1] So total redistribution would represent an increase of 0.3% to the take-home pay of the average big company worker. Again, no matter how you want to slice it, aggregate CEO pay is simply too small in magnitude relative to aggregate American salaries to have any meaningful impact. At most you could say something about it being symptomatic of a larger problem, but CEO pay is absolutely not the direct cause of slow growth in wages. [1] https://www.usatoday.com/story/money/business/2018/05/25/ceos-11-million-year-salary-just-middle-pack/643823002/ https://www.usatoday.com/story/money/business/2018/05/25/ceo...
  - AstralStorm 7y ago
    I'd say lobbying and voting with money is, and CEOs are responsible for it. The richer they are, the less they care about wage or product, the more they care about extracting rent - via investment or cuts, causing stock market reactions, which ignore all those things. They tend to also lose the common touch, just like the aristocracy that preceded them.
james_s_tayler 7y ago
CEOs don't add anything of economic value? Riiiiiight.
- dcolkitt 7y ago
  In case it wasn't clear, I'm not making that claim. I'm simply laying out the most generous conceivable case to show why it's mathematically impossible for CEO compensation to directly explain slow secular growth in wages.

creato 7y ago

> 2. CEO salaries are certainly relevant to the working middle class, since they are commonly seen as tremendously too high and the extra money could contribute to the middle class' wage. This may be how they are "commonly seen", but is it correct? Walmart pays 5 of its executives a total of ~$70m/year [1]. Walmart employs 2.2m people [2]. Redistributing 100% of these 5 executives' salary to all 2.2m workers would be a raise of... $32/year. The bigger issue with wealth inequality is the investor class and favorable treatment of capital (low capital gains tax rates, carried interest, shady real estate business, etc.), not salaries/wages, even extremely high salaries like those of executives. Even talking about "management" as relevant to this issue is a distraction. 1. https://www1.salary.com/WALMART-INC-Executive-Salaries.html https://www1.salary.com/WALMART-INC-Executive-Salaries.html 2. https://corporate.walmart.com/newsroom/company-facts https://corporate.walmart.com/newsroom/company-facts

rayiner 7y ago
> The bigger issue with wealth inequality is the investor class and favorable treatment of capital (low capital gains tax rates, carried interest, shady real estate business, etc.) It’s not that either. Total realized capital gains income in 2017 was $660 billion. 30% of that went to the bottom 99%. So you’re talking about $462 billion to the top 1%. Even totally confiscating that income and redirecting it to the bottom 99% would only increase income for the bottom 99% by 5.5%. People see eye popping CEO pay but divvying up a few very high incomes doesn’t go far. 60% of all income is earned by the top 60-99%. 40% is earned by the top 20%. A lot of income inequality is driven not by CEOs and billionaires, but educated urban professionals. College administrators, programmers, doctors, IT managers, etc.
- asdff 7y ago
  Even 5.5% would be a big deal for many people. Minimum wage is about to hit $15 in california, so 30k/yr netting you another $1650. 4/10 americans can't come up with $400 without selling something or incurring debt; this would at least be breathing room. I agree that parceling it out piecemeal might not be the best way to spend that sum. $462b could be put into an education or infrastructure trust, and pay dividends towards our schools, public housing, roads, and transit networks. And that would be $462b per year dumped into this trust.

manigandham 7y ago

The vast majority of CEO positions are nowhere near the 8/9 figure ranges. The ones that are involve making decisions that affect thousands or millions of employees and their families, numerous vendors and suppliers, entire secondary industries, along with hundreds of billions of dollars in business value. In that case, the pay is a tiny fraction of company earnings to get talent that's capable and willing to shoulder that responsibility and also accept any potential long-term reputation hits. Companies aren't looking to waste money. If they could find a magical CEO at 1/10th of the price, they would. There's a reason those jobs are worth that much.

unlinked_dll 7y ago
I mean there are reasons. The debate is if they're good reasons and what impact they have on the rest of the company and society as a whole. Looking at medians and averages isn't the same thing as looking at extrema, and discarding those extrema is harmful to the data set when you can try and infer things about those extremes and how they impact the data set. Every person working on data eventually has to deal with this. When it comes to executive compensation the question isn't if it's a market reality or not. It obviously is. The question is if those market realities are beneficial to everyone else impacted by the market, and many would argue otherwise. Yes, golden parachutes and lucrative salaries/equity options are par for the course for fortune 1k companies. But how do those packages influence incentives? Are they encouraging, even creating positive feedback loops for short term incentives that cause inefficiencies in our companies? Are they a symptom or source of greater issues relating to long term health of our labor markets for average workers? I don't know, but it's worth investigation.
- manigandham 7y ago
  The extrema includes the size and scope of the company that pays those salaries, so you need to take that into account. It's generally agreed that more performance-based pay with long-term goals and clawbacks on excessive failures, negligence and unethical acts is the way to go, and most companies are already shifting to this.
badpun 7y ago

dvt 7y ago

> I don't think it's a big secret that stamping out unions is a key part of modern management. If McKinsey and other consulting firms were management consultants, they should be even more aware of that strategy and would have been in a key position to effect that change over a large number of companies. This is revisionism. Stamping out unions has nothing to do with modern management and everything to do with the (eternal) conflict between management vs. unions. The reason why unions are more and more scarce is a complex one riddled with both positives (employers are more sensitive to employee needs, government has implemented legislature that protects workers) and negatives (unions are often rife with corruption and cronyism). McKinsey is a footnote at best. > CEO salaries are certainly relevant to the working middle class, since they are commonly seen as tremendously too high and the extra money could contribute to the middle class' wage. This has already been debunked ad nauseam in this thread. We should be talking about capital gains, offshore accounts, low-interest corporate bailouts, quantitative easing (!!!), etc. But CEO salary outrage gets clicks. > I think the point of that sentence is more like "the amount of effort it takes to become successful is significantly greater than it was when the system worked better." I'm not sure how you're reading that. If anything, he mentioned how most CEOs of old had worked on the company line for like 30 years prior and is lamenting that "all" executives need these days is a diploma from an elite school and a McKinsey badge.

a3n 7y ago

High executive pay is not all of what's capturing working class value. It's also corporations simply not paying as much percentage of production to producers as they used to.